On March 15, 2024, the National Association of Realtors (NAR) reached a significant settlement that will change how broker commissions work in real estate transactions. This settlement, which still needs court approval, aims to address complaints from home sellers and will take effect on August 17, 2024. Here's a breakdown of what's coming:

Written Agreements for Homebuyers

One major change is the requirement for real estate agents to sign written agreements with buyers before showing any homes. The terms need to be specific and clear, such as a flat fee, a percentage, or an hourly rate, with no open-ended arrangements. Agents cannot receive more compensation than what is agreed upon and the agreement must clearly state that broker fees and commissions are negotiable. These changes are designed to ensure buyers know exactly what they're getting into, with no surprises about costs and services.

Traditional Compensation for Buyers' Agents

Traditionally, buyers' agents have been paid through a commission covered by the seller. When a home is sold, the seller agrees to pay a commission fee, usually split between the seller's agent and the buyer's agent. This commission is generally a percentage of the home's sale price and is included in the total closing costs. The amount is listed on the multiple listing service (MLS), allowing buyers' agents to know the compensation they will receive. This system has been criticized for potentially leading agents to prioritize properties with higher commissions over those that best fit their clients' needs.

New Rules About How Compensation Offers Are Shared

Compensation offers can no longer be listed on MLS platforms. However, sellers can offer compensation off an MLS through negotiation with real estate professionals. They can still offer concessions, such as covering closing costs, on an MLS.

Implications for Home Buyers and Sellers

Buyers will need to sign a written agreement with their agents before touring homes, detailing services and compensation, but this is not required for casual interactions like open houses. Sellers will no longer be required to pay the buyer's agent commission on MLS systems, potentially shifting this cost to buyers. Since most homebuyers will still need a real estate agent to help them purchase a home, sellers should explore alternative ways to compensate buyers' agents, including direct negotiations.

Navigating the Changes

The only thing constant is change—these new rules for written agreements and compensation offers will cause adjustments for buyers and sellers. As a professional real estate agent, you can trust that I'll keep you informed and prepared for these changes to ensure a smooth buying or selling experience.